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In this paper, I first estimate hedonic price equations for computer spreadsheet programs, and then use the analysis to empirically test whether network externalities exist in this industry. The study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the Lotus platform and for spreadsheets that offer… (More)

Open source software (OSS) is an economic paradox. Development of open source software is often done by unpaid volunteers and the " source code " is typically freely available. Surveys suggest that status, signaling, and intrinsic motivations play an important role in inducing developers to invest effort. Contribution to an OSS project is rewarded by adding… (More)

This paper assesses the private and social incentives for disjoint networks to interconnect under various ownership structures. Terms of interconnection are derived for a noncooperative equilibrium. We find that networks mutually profit from interconnection when it creates new services that did not exist beforehand, but also when it creates services that… (More)

The open source model is a form of software development in which the source code is made available, free of charge, to all interested parties; further users have the right to modify and extend the program. Open source software (OSS) methods rely on developers who reveal the source code under an open source license. Under certain types of open source… (More)

In this paper we develop a model with (1) differentiated consumers, (2) endogenous adoption times, (3) technical uncertainty, and (4) alternative technologies sponsored by competing vendors. We identify conditions under which orphaning arises endogenously in a framework of dynamic competition. We then use the model to examine the development of the… (More)

The conventional wisdom is that indirect network effects, unlike direct network effects, do not give rise to externalities. In this paper we show that under very general conditions, indirect network effects lead to adoption externalities. In particular we show that in markets where consumption benefits arise from hard-ware/software systems, adoption… (More)

† Views presented in this paper are those of authors, and do not represent Bank of Canada's position. Abstract: We analyze how network effects affect competition in the nascent cryptocurrency market. We do so by examining early dynamics of exchange rates among different cryptocurrencies. While Bitcoin essentially dominates this market, our data suggest no… (More)

Given the dramatic growth of the Internet and information technology industries in general, and the importance of interconnection in these networks, the economics of compatibility and standardization has become mainstream economics. In this paper, I examine several key policy aspects of standard setting in industries with network effects.

In this paper, we examine how software vulnerabilities affect firms that sell software and consumers that purchase software. In particular, we model three decisions of the firm: (I) an upfront investment in the quality of the software to reduce potential vulnerabilities, (II) a policy decision whether to announce vulnerabilities, (III) and a price for the… (More)